India extends bar on business with Leonardo, keeps AgustaWestland out of $3 Billion NUH programme

India's Military market out of bounds for AgustaWestland and its parent group, as Ministry of Defence stretches embargo till May 2019

New DelhiDecember 26, 2018By Vishal ThaparPhoto(s): By Leonardo

AgustaWestland's business pitch is restricted to the AW 119Kx Koala, a civil variant of its light utility helicopter

The Indian Ministry of Defence has extended its embargo on business dealings with the European conglomerate Leonardo and its constituent companies till May 2019, ruling out its participation in the 21,000 crore ($3 billion) Naval Utility Helicopter (NUH) procurement programme.

"All procurement and acquisition cases in the pipeline with Leonardo were put on hold with effect from July 2014, soon after the NDA Government assumed office. The latest extension of orders regarding suspension of business dealings were issued for a period of six months with effect from November 8, 2018," Government sources told this reporter.

Although not officially blacklisted, Leonardo continues to be persona non grata at South Block, shutting it out of several multi-billion dollar procurement programmes

This leaves the field in the NUH procurement open only for Sikorsky, Airbus and Kamov, it was disclosed. The procurement of 111 naval utility helicopters will be the first project under the ambitious Strategic Partnership Model, which gives opportunity to Indian private sector companies to emerge as big league players and primary integrators of aerospace and defence platforms.

RFIs in the NUH programme were issued to global OEMs earlier this year. In the next stage, RFIs will be issued to Indian private sector companies, which will ultimately take the lead in this programme after tying up with shortlisted foreign OEMs. The RFP will finally be issued to Indian companies only. The Tata and Mahindra Groups are in the reckoning. The Adani group, too, is making efforts through tie-ups and acquisitions to make the cut.

The embargo on Leonardo, however, does not apply to the civil aviation domain. Government sources also confirmed that a joint venture between Tata Sons and AgustaWestland of the Leonardo group has the approval of the Government of India. The modus vivendi, however, is an amendment to the original business proposal restricting its activities to the civil aviation market in India.

But the civil aviation market offers a lifeline: The Military embargo on AgustaWestland does not apply here, and the terms of its India JV with Tata have been suitably amended to legitimize business

"Indian Rotocraft Ltd, a joint venture between Tata Sons and AgustaWestland NV, The Netherlands, was issued approval for foreign investment in September 2011 for final assembly of both civil and military versions of the AW 119Ke helicopter in India with 26 per cent FDI," official sources stated.

"Current approval to this JV is for final assembly of AgustaWestland helicopters for the Indian civil market only or for export," sources disclosed.

The amendment, which was approved by the Department of Economic Affairs in 2015, also involves change in the foreign partner from M/s AgustaWestland NV, The Netherlands, to M/s AgustaWestland SpA, Italy, for the assembly of helicopter model AW 119Kx in place of AW 119Ke. The AW 119Kx Koala is a civilian variant of the single engine, eight-seat utility helicopter.